There is never any RealWhen tax season rolls around each year, there are many people who enjoy it. Although tax season can feel daunting, it’s a good time to gauge where your money is going each year and how much of it is coming back (and hopefully, a good chunk will come back).
If all goes well, tax season could mean extra money in your bank account. According to IRS, the average tax return this year was $2,323. These refunds come at an important time, as inflation in gas prices and living expenses, as well as groceries, are putting a strain on many households financially.
Are you still able to get a little extra from your tax return? Here are some tips to maximize your tax refund.
1. Pay off debt
You can use a tax refund to pay down debt if you have one. You can tackle credit card balances and personal loans with high interest rates such as car loans and student loans.
You can avoid the annoying interest that accrues on your accounts every month by paying down these debts with the extra funds you receive from your taxes. By making extra payments or paying off some debt completely, you’ll also see your credit score start to rise. A large weight will be lifted by not staring at a heavy credit card statement.
2. Your emergency savings fund should be built
Your savings are a vital part of your finances and budget. They provide you with the cushion you need in case of financial emergencies. Consider increasing your emergency savings if you receive a tax refund that was unexpected or expected.
You can save some money for a rainy night by setting aside some money. An emergency savings account is typically able to cover six to nine months of living expenses in the event of an unexpected financial hardship, such as losing your job or unanticipated medical costs. It is not an easy goal to achieve, but it is smart to use your tax refund to help you get started or increase the savings that you do have. Future you’ll be glad you did.
3. Get started investing
If you haven’t started investing, using the funds from your tax refund is a great way to get in the game. There are many options for investing, including increasing your 401k contributions or investing in cryptocurrency. Many online trading platforms offer incentives for first-time investors. These include a low entry fee to open your portfolio and education.
If you’re looking to use your tax refund to invest, educate yourself on the risks of each type of investing strategy. Find the best strategy to help you start or expand your investment portfolio.
4. Start your side hustle
What about using your tax refund money to make more? You can invest in yourself by using your tax money to fund or start your side hustle. Spend it on the tools and resources you need to increase your other streams of income. Set up your home office to support your freelance business or start your own business. You can use your refund to purchase professional equipment that will help you to start or improve your side hustle.
Use your tax refund for online trainings and sessions to learn as much about yourself and how to make them into a lucrative business. It’s a great way for you to make extra money and flip your tax refund.
5. Donate to a charity
A few extra dollars can go a long ways for someone else. With your tax refund, you can invest in someone by helping a charity or cause. Your monetary donation can help improve someone else’s life.
Start by evaluating charities that are important to you and then consider giving more money to those causes in the coming year. Are you unsure where to donate your money? Ask your family, friends, and coworkers for suggestions on important causes you could support.
Don’t forget to take advantage of your company’s gift matching program if they have one available. Employee gift matching programs usually match a percentage or all of your donation to a charity, event, or cause. This doubles the amount donated to that charity. It’s a great way to give back even more, with the help of your company.
Charitable donations made this year can also go toward your itemized deductions for next year’s tax season, so use your tax refund to give back to others, and it will come right back to you next year. It’s a win-win for everyone!
6. Remodel your home
Are you still trying to fix that leaky faucet Do you need extra funds to complete the project around your house? You can use your tax refund to make important home improvements. Improving your home can increase your home’s value over time, adding to your equity and your overall wealth.
Your tax refund can be used to help you next year. You could get a tax credit next tax season for energy-efficient home improvements such as installing solar panels or replacing major appliances like your water heater. Improving your home to sell it soon can also be used on next year’s taxes. You can write off the proceeds from the sale of your home and add the renovations to your taxes next year.
7. Treat yourself to something special
Let’s be honest: You worked so hard last year. Spend a little of your tax refund to pamper yourself. Whether you’re overdue for a spa day, looking to travel and take a much-needed vacation, or still eyeing those new shoes in your Amazon shopping cart, splurge a little on yourself with your tax refund.
Enjoy the fruits of your labor, literally! Give yourself a treat this tax season. Even if it doesn’t help grow your wealth, spending some refund dollars on self-care is essential to your physical, emotional, and mental health. Spend a few dollars of your refund this year to take care of yourself. We know you are worthy of it!
Source: The Every Girl